Indian MFIs Face Legal Hurdles in Plans to Track Borrowers’ Credit Histories Through National IDs

Tuesday, September 8, 2015

Microfinanciers’ plans to check Aadhaar numbers to ensure potential borrowers aren’t already loaded with loans may come undone after a recent interim ruling by the Supreme Court restricted the use of Aadhaar data to ration shops and cooking gas.

While referring a bunch of petitions on the validity of Aadhaar to a five-judge Constitution bench on 11 August, the apex court asked the government not to share Aadhaar data with any authority.

However, the industry’s two self-regulatory organizations—Microfinance Institutions Network (MFIN) and Sa-Dhan—believe Aadhaar should be the primary identity for borrowers.

“We have met with microfinance institutions (MFIs) and asked them to create a separate field to feed in Aadhaar number for all borrowers,” said Ratna Viswanathan, chief executive officer, MFIN. Starting October, MFIN plans to have every borrower’s Aadhaar captured in the system by April 2016.

“We had a meeting with UIDAI (Unique Identification Authority of India) and we are also asking MFIs to encourage people who do not have Aadhaar to enrol,” said Viswanathan, adding that no one, however, will be denied a loan if they do not have the number.

Sa-Dhan is working with MFIs and UIDAI to organize camps to enrol borrowers for Aadhar, executive director P. Satish said.